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How to get a tax deduction

Mortgages are now in great demand and many banks offer borrowers different conditions. It often happens that you take a mortgage at one percent, then time passes and another bank offers better conditions. In order not to overpay, you can refinance the loan. How to apply for refinancing and maintain your right to a property tax deduction? What should be considered when obtaining a new loan? Details below.

Is the right to deductible when refinancing a mortgage lost?
Mortgage refinancing is the process of obtaining a new loan from a bank on more favorable terms to pay off a previous loan.

The fact of refinancing does not affect the right to receive a property tax deduction. When making a deduction, you will need to collect supporting documents. You will definitely need a mortgage agreement and a certificate of interest paid. Therefore, if you are refinancing your mortgage, and at the same time plan to receive a tax deduction, then you need to make sure that the new contract indicates the property for which you are refinancing the original loan. That is, there should be a clear connection between the primary mortgage and the new loan.

If you just took out another loan to close the old one (without connection with the previous loan), then you will not be able to receive a tax deduction.

We recommend that you immediately take care of obtaining a document from which the amount of the balance of the principal debt at the time of refinancing is clearly visible. You will need it to receive a tax deduction.

Recall the conditions for obtaining a tax deduction.

Who can get a property deduction?
There are 2 conditions under which you can receive a tax deduction at the same time:

You must be a tax resident, i.e. you must live in Russia for more than 183 days a year

You must have income subject to personal income tax at a rate of 13% and pay tax on it.

From 2021, you will be able to receive a deduction from the following types of income received:

on labor and civil law contracts,

from payment for the provision of various services,

from the sale of property and its lease,

insurance and pension payments.

How much money can you get back with the deduction?
You can return 13% of the amount of interest paid on the mortgage, but not more than 390,000 rubles per year. The restriction is due to the fact that this deduction has a limit of 3 million rubles, and according to the law you can return no more than 13% of the limit.

If you took out the initial loan before 2014, now you will not have restrictions on the amount of repayment – how much interest you paid, you will return 13% of this amount. The thing is that until 2014 there was no limit on the deduction, which means that there will be no such limit now.

Remember that a tax deduction is a return of previously paid personal income tax, so how much tax you paid per year is how much you can return.

You can refinance a mortgage several times (there is no restriction on this under the law), but remember that a prerequisite for receiving a deduction is a clear connection between loans and the purpose of the loan should be the acquisition of real estate specified in the first contract.

If you take out a new loan for a larger amount than the balance of the principal debt on the original loan, then the deduction will be calculated in proportion to the balance.

How do I get a refund for refinancing?
As well as with the usual registration of a mortgage – either through your employer or through the tax office.

Recall that in order to issue a deduction through the inspection, you must wait until the end of the calendar year in which you had expenses, and only then submit documents for the deduction.

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